Why ASML Holding Stock Was Falling Today

Shares of the chip equipment manufacturer pulled back after a disappointing earnings report.

Shares of ASML Holding (ASML -7.15%), the leading manufacturer of semiconductor producing equipment, were moving lower today after the company turned in disappointing results in its first-quarter earnings report.

As of 11:54 a.m. ET on Wednesday, the stock was down 7.4% on the news.

Silicon microchips and circuits on a wafer

Image source: Getty Images.

ASML comes up short

Revenue was down 22% from the quarter a year ago as the company transitions to new technology to prepare for the AI boom. It fell to 5.29 billion euros and was down even more sequentially. That result, which was equal to $5.62 billion, missed estimates at $5.87 billion.

ASML’s gross margin improved from 50.6% to 51%, but operating margins fell from 32.7% to 26.3% as spending on research and development rose, along with selling, general, and administrative expenses.

Earnings of $3.30 per share were down from $5.26 in the quarter a year ago. That still beat estimates at $3.15.

CEO Peter Wennink said, “We see 2024 as a transition year with continued investments in both capacity ramp and technology to be ready for the turn in the cycle.”

What’s next for ASML

The news seems to signal that chip manufacturers like Intel, Taiwan Semiconductor, and Samsung aren’t rushing to upgrade their equipment in order to prepare for the wave of AI-related demand.

ASML’s guidance also indicated a continuing decline in year-over-year revenue. For the second quarter, the company expects revenue of $6.1 billion to $6.7 billion, which compares to $7.3 billion.

The slowdown isn’t alarming because ASML’s business tends to be lumpy, but a pullback in the stock seems justified as the stock had soared along with a broader AI boom since last October. Based on its guidance, dialing back some enthusiasm for the stock makes sense.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

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